Duncan Brown: Low pay, no way

Given that the 8% decline in average real incomes since 2008 is almost certainly the highest on record since the 1870s, it is not surprising that September’s UK political party conferences saw some eye-catching proposals to help those lower down the income scale.

These include free childcare funded by a banking levy (Labour); taking those on the minimum wage out of income tax altogether (Liberal Democrats); and tax breaks for married couples (Conservatives).

I was at two events in September exploring some of the ways in which the HR community might contribute on the same agenda, speaking in a debate on low pay at the excellent Employee Benefits Live event, and at another well-attended seminar on equal pay that we ran at Aon Hewitt.

Inaction appears to be the watchword at the moment in the HR and reward community on both issues. Only a handful of the 50 employers represented at the equal pay seminar had carried out an equal pay audit. And in Employee Benefits’ debate, Mike Kelly, chair of the Living Wage Foundation, expressed the view that HR professionals are simply not at the table in the high-level policy discussions going on in all three major parties at the moment to, as Chancellor George Osborne expressed it, ‘share the rewards’ of economic recovery more widely.

However, the two events touched on many similar concerns and demonstrated their interlocking nature.

Some 24% of female employees earn less than the defined living wage level, with a concentration in the low-paid ‘Five C’ occupations (catering, cleaning, caring, cashiering and clerical), compared with just 8% of male workers who are under the living wage level. Disproportionately increase low pay levels and you close the gender pay gap as well, which most surveys would suggest is steadfastly stuck at about 15% of average earnings.

But you also push up labour costs. Hence the basis for the fears over widespread adoption of the living wage voiced by CBI head John Cridland, who claims it would “lock out the unemployed and fire up inflation”. He ignores the fact that, in real terms, the national minimum wage is below the level of 2004.

Is it this fear of crossing our business masters that explains why the HR and reward community seems so quiescent on these two issues? Strange if so, given that a strong business case can be made for addressing low pay. Business minister Vince Cable argued at the Lib Dems’ conference that “there is no long-term future in Britain being a low-pay, low-productivity economy”.

Marieanne Fallon, head of corporate affairs at KPMG, explains how moving to the living wage at her firm has reduced low-paid employee turnover by 50%, cutting recruitment costs by £75,000 on one contract alone.

Although I couldn’t attend the parallel debate on high pay at Employee Benefits Live, I can’t help wondering how we would all vote if offered a national referendum to adopt a cap on the (predominantly male) executive pay levels of 12 times the earnings of the lowest paid, as happened recently in Switzerland. An election winner?